Saving for retirement is essential if you want the financial freedom to enjoy your later years. The State Pension is currently worth a maximum of £113.10 a week.

And even though it generally increases slightly every year, it is highly unlikely to provide the income you need to maintain a comfortable standard of living once you have stopped working.

Guide to savings

Savings Guides

Money is tight so it’s more important than ever to get a good deal on your savings, whether you are putting money aside for a holiday or for your children’s future. But it’s not always easy to find the right savings account. Interest rates are relatively low, but inflation is comparatively high – and high inflation eats into savers’ returns.

The number of savings accounts on offer can also make it difficult to choose the best deal. But if you read our guide to savings and use the MoneySuperMarket website to compare all types of account, it should be simple to find a top rate. You can also work out how much interest you’ll earn by using a savings calculator.

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Just remember that you need to regularly monitor your rate and maybe even switch your account to make sure your cash is always working hard.

How do I choose a savings account?

Savers can often be overwhelmed by the range of accounts on the market, all with different rates and different rules. Some people simply select the account that pays the highest rate of interest. But it’s important to look beyond the headline rate at the terms and conditions of the account. You might, for example, be able to earn 5% in a regular savings account, but if you cannot put money aside each and every month, the account is not for you.

Instant or easy access accounts are the most straightforward - and the most flexible - because you can usually deposit and withdraw your cash pretty much when you like.

If you think you might be tempted to dip into an easy access account, a notice account might be more suitable because you have to give notice of any withdrawals. The notice periods vary, but can be as long as 120 days. Always compare the rates on notice accounts against easy access deals. Notice accounts traditionally paid higher rates of interest than easy access accounts, because of their inflexibility. But these days, you can often earn more with easy access.

You might be able to earn a higher rate of interest in a fixed-rate account, sometimes called a bond. The accounts pay a fixed rate of interest for a set term, usually between one and five years, and can be ideal if you are saving for an event in the future. But watch out for penalties. If you withdraw any money before the term of the bond expires, you usually forfeit interest.

A number of banks and building societies offer regular savings account that demand a monthly commitment, usually for one year. The amount you can save in a regular account is also limited to a maximum of about £300 a month.

Older savers might be able to earn preferential rates in over 50s accounts. Interest on children’s accounts can also be high to tempt even the very youngest savers to open an account. If you need an account that accepts sterling, Euros or dollars, you might want to consider an offshore account. They can be useful if you are paid in another currency or you earn additional income in a foreign currency, perhaps from a rental property overseas.

You may also be looking for a business savings account – business savings accounts are a great way to enjoy a higher rate of interest so that your cash is working harder for you and your business.

Are my savings taxed?

Her Majesty’s Revenue & Customs automatically swipes 20% tax off your savings. If you are a 40% or 45% taxpayer, you have to declare the savings interest on your tax return and pay any additional tax due.

Non-taxpayers, including children, should complete form R85, which is available from banks and building societies. The interest is then paid gross, before any tax is deducted. But beware the £100 rule. If the money in a child’s account is given by a parent, any interest over £100 is taxed as the parent’s own.

Are there any tax-free accounts?

A Cash ISA is just like an ordinary savings account, with one important exception – the interest is tax free. You can find out more about the current ISA allowance here. You can save up to £15,000 in a cash ISA in the current tax year and you can choose from a range of different accounts, including easy access ISAs and fixed-rate ISAs. Taxpayers should almost always put money in an ISA, ahead of a standard savings accounts.

In November 2011, the Junior ISA was born. Parents, relatives and friends can invest up to £4,000 each year into a Junior ISA and the money grows tax-free until the child reaches 18.

Are there any catches with savings account?

Short term bonuses

Many of the top rate accounts include an introductory or short term bonus. For example, an account might advertise a headline interest rate of 3%, which includes a bonus of one percentage point for one year. In other words, after 12 months, the rate on the account will drop to 2%.

The bonuses help to propel the accounts into the best buy tables, but they can work to the savers’ advantage – as long as you are prepared to search for a better deal when the bonus expires.

Deposit and withdrawal restrictions

Some accounts restrict the amount you can save, or the amount or frequency of any withdrawals. You have to make sure you don’t breach the limits otherwise you could lose interest.

Online access

It’s usually cheaper for a bank to offer internet accounts than branch based deals, so you can often earn a higher rate of interest if you manage your account online.

When is interest paid?

Interest on savings accounts is usually paid either monthly or annually. It’s probably best to opt for annual interest, unless you expect frequently to dip into your funds.

Are my savings safe?

The tough economic conditions have made savers wary of even the biggest banks in the world. But if your bank or building society goes bust, as long as it is regulated by the Financial Services Authority, the first £85,000 of your money is guaranteed under the Financial Services Compensation Scheme. If you have a lot of savings and are you are particularly nervous, you should therefore make sure you don’t deposit more than £85,000 with one institution.

How our site works

Tell us which type of savings account you're interested in

Use our simple savings account search if you’re unsure of the best account type

You can choose the account that suits you best and apply online through the provider

Why are we the best website for savings comparison?

Simply because we offer a free, independent and whole of market view. That’s all savings accounts in one place.

How our site is paid for

We like being straightforward at MoneySuperMarket, so we want to let you know how we get paid.

How do we make money on savings accounts at MoneySuperMarket?

When someone applies for a savings account through MoneySuperMarket, the bank or building society that runs that account will usually pay us a fee.

We don’t work directly with all banks and building societies, so we don’t make any money from some of the savings accounts we show.

Do we offer the ‘whole of market’ on savings accounts?

We try to, but not every bank or building society offering savings accounts wants to be on our site.

We include as many savings accounts as we can on MoneySuperMarket – including accounts from banks and building societies we work with and those we don’t.

You can apply for savings accounts from banks and building societies we work with by clicking ‘Go to site’. If you’d like to apply for a savings account from a company we don’t work with, you may have to go to their website directly.

The accounts in our ‘featured’ lists are from banks and building societies we work with.

You can choose to ‘see all’ the savings accounts on our site, or go here to see all the accounts.

How do our relationships with banks and building societies affect our service to you?

We never allow banks and building societies to get in the way of what’s best for our customers. So we always display savings accounts by their benefits to you – such as the best interest rate – never by what’s best for a bank or building society.

Why are we telling you this?

Our services are always free to you, our customers. But we think it’s important that we’re transparent about how we earn money, so you can be confident we put our customers first.

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